London set to receive more funding from the public purse than every other English region combined

Investment in London equates to £5,305 per person, compared to UK average of £3,192 per person

Study shows London bias despite the capital having the strongest private sector activity of all English regions

Public spending on infrastructure investment is heavily biased towards London, with the capital set to receive more funding than every other English region combined, according to a new report by the University of Sheffield.

The Sheffield Political Economy Research Institute’s (SPERI) analysis of the Government’s National Infrastructure Pipeline shows that infrastructure investment in London is set to be over £45 billion, which is equal to £5,305 for each member of London’s population. This compares to a UK average of £3,192 per person.

Every other English region has planned public infrastructure investment significantly below London, and below the UK average. Investment will be £1,946 per head in the North West, £851 per head in Yorkshire and Humberside and just £414 per head in the North East – the lowest of any English region.

The National Infrastructure Pipeline includes investment projects in sectors such as Energy, Transport, Waste, Communications, Water and Science. SPERI’s researchers analysed the Pipeline published by the Government in December 2014.

Dr Craig Berry, co-author of the report and Deputy Director of SPERI, said: “The Chancellor talks about creating a more balanced, higher productivity economy but is so far failing to deliver it. These findings call into question the government’s commitment to economic rebalancing and to creating a Northern Powerhouse.”

The report by SPERI researchers also looks at the relationship between regional investment in infrastructure and private sector business activity. Its findings call into question one of the key arguments used by the Government to underpin their austerity agenda which is that public investment ‘crowds out’ private sector activity.

The ‘crowding out’ argument suggests that those areas where the private sector is strongest will have lower levels of public investment in infrastructure, and that investment will be directed to where business activity is weakest to encourage a private-sector led recovery.

Yet the report finds that English regions where the private sector is weakest receive far less infrastructure investment.

London has the strongest private sector with more businesses and more start-up businesses than any other region, and receives the most infrastructure investment. The capital has 470 businesses and 98 start-ups per 10,000 residents (a start-up rate more than twice as fast as any other region, excluding the South East and East of England).

The three Northern regions have fewer businesses per head than all other English regions. Just three per cent of businesses in England, and three per cent of business start-ups, are based in the North East.

Dr Berry said: “Investing in infrastructure to improve our transport, digital and energy networks is a way of improving productivity and boosting the private sector. Our analysis suggests that the government is content to maintain the bias of investment towards London, because it seeks to support the strong business activity that already exists in the capital. This is clearly a much higher priority for George Osborne and his colleagues than increasing productivity and business activity in the Northern regions. The findings report also suggest that the crowding-out thesis is purely part of the rhetorical justification of austerity, and forms no part of the actual decisions on which regions should benefit from public sector infrastructure investment.

He added: “Continuing to disproportionately invest in infrastructure in London risks fuelling the regional imbalances in our economy, and in coming years this looks set to get worse. The National Infrastructure Pipeline doesn’t include plans to build the Crossrail 2 rail line in London or expand Heathrow. Yet it does include plans to electrify the Trans-Pennine and Midland Mainline railways that have been indefinitely ‘paused’.”

Today’s publication is co-authored by SPERI researchers Dr Craig Berry, Dr Laura White and Tom Hunt and is the fifteenth in a new series of SPERI British Political Economy Briefs.

Through this series SPERI hopes to draw upon the expertise of its academic researchers to influence the debate in the UK on sustainable economic recovery.

Additional information

Sheffield Political Economy Research Institute

The Sheffield Political Economy Research Institute (SPERI) is an academic institute based at the University of Sheffield. The institute aims to bring together leading international researchers, policy-makers, journalists and opinion formers to develop new ways of thinking about the economic and political challenges posed for the whole world by the current combination of financial crisis, shifting economic power and environmental threat.

With almost 26,000 of the brightest students from around 120 countries, learning alongside over 1,200 of the best academics from across the globe, the University of Sheffield is one of the world’s leading universities.

A member of the UK’s prestigious Russell Group of leading research-led institutions, Sheffield offers world-class teaching and research excellence across a wide range of disciplines.

Unified by the power of discovery and understanding, staff and students at the university are committed to finding new ways to transform the world we live in.

In 2014 it was voted number one university in the UK for Student Satisfaction by Times Higher Education and in the last decade has won four Queen’s Anniversary Prizes in recognition of the outstanding contribution to the United Kingdom’s intellectual, economic, cultural and social life.

Sheffield has five Nobel Prize winners among former staff and students and its alumni go on to hold positions of great responsibility and influence all over the world, making significant contributions in their chosen fields.

Global research partners and clients include Boeing, Rolls-Royce, Unilever, AstraZeneca, Glaxo SmithKline, Siemens and Airbus, as well as many UK and overseas government agencies and charitable foundations.